Cultivating Crisis? India’s Overdependence on Subsidised Urea

India is experiencing an impending shortage of urea, given that the demand exceeds the supply. Given subsidies, excessive demand, and reliance on imports, it requires an immediate change in policy and supply.India's heavy reliance on heavily subsidized urea has created a significant "Cultivating Crisis" with severe environmental, economic, and agricultural sustainability impacts. The fixed, low price of urea encourages overuse and discourages the use of balanced alternatives, leading to a host of problems.

The agricultural sector is one of the pillars of the Indian economy and food security model whose continued existence largely depends on chemical fertilisers to propagate the high-yielding cropping models. Among them, one of the leading impacts is formed by urea, which has a rich composition of nitrogen with a high degree of subsidisation of the prices. Nonetheless, the patterns in recent times show a trend of decreasing gap in urea production within the country and increased consumption, leading to the fear of possible scarcity. Policy distortions such as price controls are worsening this imbalance as they are used to encourage excessive use of an ingredient and put away balanced nutrient application. The government is still importing urea in lieu of the deficit, which means that India will be vulnerable to the fluctuations in the global market, interruption of supply chains, and geopolitical risks. The financial impact of subsidies and the ecological implications of full-scale nitrogen use do not make the situation any better.

Understanding India’s Growing Dependence on Subsidised Urea and Its Consequences

In this regard, the Article critically reviews the policy and structure-based drivers that lead to the looming urea crisis in India. Such an account defines the consequences of agricultural sustainability, economic stability, and food security, and highlights the need to have a combined demand-supply management.

Consumption vs.Production

The urea consumption in India is generating an on-going overtake of domestic output, hence creating a structural disequilibrium, which is jeopardizing the sustainability of agriculture and fiscal stability.

Increasing Demand Fuelled by Agriculture
The level of urea usage in India has also been increasing in an upward trend of about 40million tonnes in the year 2024-25, compared to the previous year of 38.8million tonnes. This increase has been, to a great extent, explained by more intensive cultivation practices, especially in those crops that trap nitrogen, like rice and wheat, as well as the increase in the area of the irrigated land. Besides, good monsoon trends and the fixed retail prices have increased the appetite to over-apply the same.

Production Plateau despite Additional Capacity
Regardless of six new urea plants that have been commissioned over the last six years, and which add 76.25 lakh metric tonnes, the domestic production is not sufficient to meet the increasing demand. India generated an all-time high production of 31.41 million tonnes. However, this is rather modest compared to the dynamics of consumption. Scalability is inhibited by operational inefficiencies, constraints in the supply of energy, and delayed successful commissioning of nascent facilities. The existing old plants are not functioning at their optimum capacity, increasing the scarcity of supply.

Strategic Vulnerability and Dependence on Imports
To cover the supply gap, India imported 7.04 million tons of urea in 2023-24, which is a negative 7.1 percent change compared to the previous year. Such dependency on foreign suppliers who are located mainly in the Middle East, China, and Russia makes India vulnerable to sudden fluctuations in prices and logistic shocks all over the world and geopolitical uncertainties. The increasing strategic worries are evidenced by the fact that the government is seeking long-term procurement contracts with other countries, including Saudi Arabia and Sri Lanka. However, its reliance on imports exaggerates the subsidy bill and the lack of self-sufficiency in the country in the much-needed farm supplies.

Implications
The widening gap in consumption-production requires the immediate recalibration of the policy. The excessive use of subsidised urea has two effects: fiscal strain and soil degradation due to the imbalance of nitrogen. It must be a multi-layered solution that includes rationalisation of subsidies, encouragement of nutrient-balanced fertilisation, and stimulation of domestic capacity by producing green ammonia and using energy-efficient technologies.

Subsidy Distortion and Overuse

The fertiliser subsidy policy, especially urea in India, has created sharp incentives to use and distortions in the farm management technique. This section critically reviews how the statutory price controls also promote overuse and destroy nutrient balance.

The price control and the incentive of overuse
The Indian farmers spread urea at a maximum retail price (MRP) value of about 266 in a 45kg bag, and the average cost of urea is more than 2000 in production costs. The resulting subsidy of more than 85 percent of the market price is paid by the government, making urea significantly cheaper than other fertilisers, including di-ammonium phosphate (DAP) and muriate of potash (MOP). This means that the incentive system is distorted, resulting in excessive application of urea by farmers driven mainly by the cost factor and not by agronomic requirements. The Indian Express revealed the consumption of urea to be 38.8 million tonnes in 2024-25, and it is expected to increase to over 40 million tonnes in the current fiscal year.

Soil Degradation and Imbalances in Nutrients
Overuse of urea has triggered a systemic disproportion in nutrient balance in soil. Nitrogen is being applied greatly, surpassing the individual levels that are recommendable, but the levels of phosphorus and potassium are not adequately maintained. This disequilibrium reduces the yield of crops in the long run and leads to soil exhaustion. According to the Fertiliser Association of India, the optimal ratio of nitrogen: phosphorus: potassium(N:P:K) 4:2:1 has been compromised in many areas to about 6.7:2.5:1. In addition, the excess application of nitrogen increases greenhouse emissions, especially nitrous oxide, which causes a significant contribution to climate change.

Fiscal Bear and Policy Rigidity
India is a country that incurred more than 2 lakh crore rupees in fertilizer subsidies in the 2022-23 fiscal year with urea taking the highest percentage. Regardless of such high expenses, the urea MRP has not been increasing in the past ten years, which is an indication of political sensitivity and policy inertia. The subsidies have been sought to be rationalised under the Nutrient-Based Subsidy (NBS) programme, which specifically exempts urea and hence continues to favour the product. Such rigidity sabotages efforts to encourage balanced fertilisation, and it also puts pressure on the state budgets, especially when there is an increase in price around the world.

Reform Imperatives and Change of Behaviour
A moderate policy adjustment is required in order to mitigate subsidy distortion. The addition of urea into the NBS scheme, along with the Direct Benefit Transfer (DBT) systems, would help to refocus farm incentives towards agronomic optimal practices. Via pricing reforms, awareness, and cards on the health of the soil, as well as district-level fertiliser prescriptions should occur. Without behavioural shift and structural redressal, India stands to lose long-term soil erosion and unsustainable fiscal recklessness.

Dependence on importation and World Volatility

The strategic vulnerability and fiscal risks of India due to its dependence on imported urea to sustain home-based needs open up the country to threats via heavy product imports. In this part, the degree of dependence on imports and susceptibility to exchange market fluctuations is discussed.

Institutionalized Reliance on Imports
Even as India has achieved current advancement in its domestic production, the demand-supply gap in India relies heavily on urea imports to compensate for the existing demand-supply gap. In 2023, the nation brought in some 7.41 million tonnes of urea, which represents close to a fifth of overall use. This reliance is present despite the last six years of the commissioning of six new urea plants that increased the production capacity by 76.2 lakh metric tonnes. The dependency on imports is structural, which demonstrates the constraint of local production as well as the on-going swell in agricultural demand, particularly in those areas of cultivation that are more apt to produce nitrogen-driven crops.

Global Price and Supply Shocks
Dependence on importation subjects India to variations in international markets for fertilizer. The price of urea is affected by the cost of global energy, especially natural gas, which is one of the major inputs used in the manufacturing of urea. Trade barriers like the export ban that was initially initiated by Russia and the Middle East, and export limitations by key suppliers, like China, have traditionally stopped supply lines and sky-rocketed the cost. As an example, the bill for the fertiliser subsidy in India increased in 2022 with the increase in the prices of imports. This volatility negatively affects the fiscal planning process and poses a risk to the availability of the fertilisers at an opportune time in the peak sowing periods.

Strategic Procurement and bilateral agreements
India has sought long-term procurement contracts with other countries (Saudi Arabia, Sri Lanka, Nepal, and Bhutan) in order to curb these risks. These are the deals that stabilise the supply and mitigate the effects of fluctuations in the spot market. Moreover, the government is also considering joint ventures, offshore production facilities in order to have steady access to the fertiliser inputs. These actions are partial in terms of insulation, but they do not address the susceptibility at the root of the external dependence.

Policy Implications and Self-Reliance
To decrease the reliance on imports, there is a need to create a strategic push towards the level of self-reliance in the production of fertilisers. This consists of faster completion of energy-efficient facilities, investments in green ammonia technologies, and improving the supply of natural gas in the country. In addition, the farming strain on imports can be reduced by the demand side interventions in the form of promoting even-handed fertilisation and rationalization of urea usage. In the absence of these policy reforms, the fertiliser security of India will be subject to the forces of the global market, with the resulting negative food security and fiscal stability implications.

Policy Imperatives and Demand Supply Management

The looming crisis of urea in India requires a policy reaction that is both informed and strategic since it has to balance the demands of agriculture, the budget, and environmental concerns. This segment outlines the major demands towards the demand and supply regulation.

The Fertiliser Subsidy Regime
The current fertiliser subsidy system, particularly when it applies to urea, has been steadily criticized for causing behavioural distortion on the side of the farmers as well as creating overuse. The Nutrient-Based Subsidy (NBS) scheme applies to non-urea fertilisers, but urea is excluded and sells at a constant maximum retail price (MRP) of INR 266. This determinism in prices has stretched over a decade and has not changed (though there has been an increase in production and import spending). It has been positively speculated that fresh integration of urea in the NBS toolbox would promote the process of dynamic pricing, reflect the nutrient value more precisely, and encourage the balanced fertilisation process.

Balance of Fertilisation and Soil Health
Soil erosion and disruption of the ideal nitrogen-phosphorus-potassium (N:P:K) ratio have been caused by excessive use of nitrogen in the main agricultural areas. The government, in turn, has increased the programmes like the Soil Health Card Programme and public-education programs on integrated nutrient management. However, adoption is non-equivalent. It is necessary to augment extension services and to tie subsidy payments with soil-test recommendations and promote the use of bio-fertilizers and micronutrients in order to restore the health and reduce dependence on urea.

Upgrading Domestic Production Capacity
Even though India has increased the urea production capacity by more than 7.6 million metric tonnes by developing six new plants, the existing plants have bottlenecks as well as energy wastage. The supply-side can be increased by expediency in the commissioning of pending units, modernisation of legacies, and capital commitments to green ammonia technologies. The governmental focus on the use of coal-gasification-based production of urea and the incorporation of the use of renewable sources of energy are avenues towards long-term sustainability, but their implementation requires consistent policy support and involvement of the private sector.

Demand Management Technology
Transparency has increased in the distribution process with the use of digital tools such as the Direct Benefit Transfer (DBT) of fertilizer subsidies, and mobile-based monitoring. It may be possible to get the coefficients to invest in these platforms with real-time usage indicators, predictive analytics, and location-specific fertiliser recommendations to help optimise demand. In addition, using the data on fertiliser utilisation with the support provided in the form of crop-insurance and minimum-price-support (MSP) systems could serve to incentivize farmers to use more sustainable input practices.

Conclusion

The discrepancy between the consumption of urea and the production of the same that is produced in India is also increasing and shows that there is a strong sensitivity to the agricultural input system of the nation. Politically expedient though it may be, the current subsidy system has led to excessive application of nitrogen and placement of heavy fiscal pressures on the government, as well as environmental destruction. Reliance on imports also adds to the situation as it exposes India to the elements of global price instability and discontinuity of supply. It should have a fine-tuned policy response that would enable supply capacities and rationalise demand at the same time. Furthermore, digital solutions can be used to improve transparency and efficiency in the organization by providing real-time monitoring and informing farmers on time.Unless actions are taken in a timely and coordinated manner, India is at risk of losing its food security, soil health, and financial sustainability, and it can be highlighted that the development of the urea crisis is not only a supply-chain problem but also a strategic necessity enabling complex and far-sighted governance.